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Oil Surge May Cost Jet Makers Orders (A & B Face the ... Loss Of Up to a 1/3 of ... Bookings)
The Wall Street Journal Online ^ | June 25, 2008 | J. LYNN LUNSFORD and SUSAN CAREY

Posted on 06/24/2008 9:59:06 PM PDT by Paleo Conservative

As rising oil prices cause even the strongest airlines to struggle, Airbus and Boeing Co. face the possibility that as many as a third of their orders for new jets could be postponed or canceled.

Driven largely by demand from airlines outside the U.S., the rival manufacturing giants over the past three years have collected almost 7,000 orders for modern fuel-efficient jets. For now, both jet makers say they are sold out for much of the next three years and are continuing with plans to raise production rates to meet demand.

But the landscape is shifting as oil prices rattle the underlying economics of the airline industry. Some airlines, including JetBlue Airways Corp. and Delta Air Lines Inc., are already taking steps to defer deliveries or rid themselves of orders. Others are starting to repeat steps they took after the Sept. 11, 2001, terror attacks, such as permanently parking gas guzzlers and selling newer jets to leasing companies for cash before leasing them back on a monthly basis.

The combined value of the orders for Airbus and Boeing planes exceeds $500 billion at list prices, .................................

Officials at Boeing and Airbus, a unit of European Aeronautic Defence & Space Co., say orders for their jets are spread across a diverse group of carriers world-wide, insulating them from regional economic swings. But they acknowledge that they are in almost daily talks with airlines seeking to cancel or defer deliveries...................

..................................

Mr. Udvar-Hazy predicts that 25% to 30% of the two makers' order books -- roughly equivalent to the number of planes that were intended to accommodate airline growth rather than replace aging planes -- could be subject to what he called the "flake-out factor" if oil prices continue their unprecedented rise.


(Excerpt) Read more at online.wsj.com ...


TOPICS: Business/Economy
KEYWORDS: aerospace


1 posted on 06/24/2008 9:59:06 PM PDT by Paleo Conservative
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To: microgood; liberallarry; cmsgop; shaggy eel; RayChuang88; Larry Lucido; namsman; jpsb; decimon; ...

If you want on or off this aerospace ping list, please contact Paleo Conservative or phantomworker by Freep mail.


2 posted on 06/24/2008 9:59:59 PM PDT by Paleo Conservative (Drill Here. Drill Now. Pay Less.)
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To: Paleo Conservative

Drill here, drill now, save jobs. Makes sense to me.


3 posted on 06/24/2008 10:22:09 PM PDT by pacpam (action=consequence and applies in all cases - friend of victory)
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To: Paleo Conservative
We may be going back to the aviation era that ended with deregulation. Air travel will be for the upper middle class and above, except for necessities.

When I was a kid (say 1973) we flew only when paid for by my Dad's business, and when my grandfather died suddenly (1000 miles away.)

4 posted on 06/24/2008 10:25:52 PM PDT by buccaneer81 (Bob Taft has soiled the family name for the next century.)
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To: Paleo Conservative

There will be a day in the not so distant future that Boeing and Airbus will have to consider a merger.


5 posted on 06/24/2008 10:31:56 PM PDT by trumandogz ("He is erratic. He is hotheaded. He loses his temper and it worries me." Sen Cochran on McCain)
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To: pacpam

Yes, we should drill here but that will not be enough to significantly lower the price of oil.


6 posted on 06/24/2008 10:33:15 PM PDT by trumandogz ("He is erratic. He is hotheaded. He loses his temper and it worries me." Sen Cochran on McCain)
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To: trumandogz; pacpam; headsonpikes
Yes, we should drill here but that will not be enough to significantly lower the price of oil.

Put Chavez' and Ahmadinejad's heads on pikes?

7 posted on 06/24/2008 10:36:56 PM PDT by Paleo Conservative (Drill Here. Drill Now. Pay Less.)
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To: Paleo Conservative
Rush has pointed out that oil-rich nations are buying airliners. His point is that that is actually the canary in the coal mine of "peak oil" - it would make no sense to buy gas-guzzling planes if the fuel to make them something other than museum pieces will not be forthcoming.

---------------------------------------------

If Clinton hadn't vetoed ANWR drilling, or if the Democrats in the Senate hadn't opposed the Bush Administration on that issue back in 2001, we would have ANWR coming down the pipeline by now - or very nearly. It's as if we built out ANWR oil - but the Democrats bombed the pipeline and the wells.

Declare war on Democrats!


8 posted on 06/25/2008 1:50:55 AM PDT by conservatism_IS_compassion (The conceit of journalistic objectivity is profoundly subversive of democratic principle.)
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To: trumandogz

airbust will be bankrupt soon, no merger let that dog die out.


9 posted on 06/25/2008 2:02:22 AM PDT by cmdr straker (BUY AMERICAN, don't get caught flying a renault ( EADS) it could leave you stranded)
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To: Paleo Conservative

Short-term vision. These new fuel-efficient planes are exactly what the industry needs to stay afloat in the age of high fuel prices. The 787 alone is at least 20% more fuel efficient than what it’s replacing.


10 posted on 06/25/2008 8:46:51 AM PDT by antiRepublicrat
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To: Paleo Conservative
I would think that, if anything, the cost of oil will accelerate orders for the 787, as it's whole Raison d'Etre is fuel efficiency.
11 posted on 06/25/2008 8:50:40 AM PDT by DesScorp
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To: cmdr straker

“airbust will be bankrupt soon, no merger let that dog die out.”

Airbus will never go bankrupt. It’s a source of pride for Europeans, and they’ll always subsidize it.


12 posted on 06/25/2008 8:53:47 AM PDT by DesScorp
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To: DesScorp
I would think that, if anything, the cost of oil will accelerate orders for the 787, as it's whole Raison d'Etre is fuel efficiency.

Lots of airlines have already ordered enough 787's to replace their 767's. This article is saying that a large part of the orders are for fleet growth rather than replacement of existing aircraft. If fuel prices remain high, air fares will have to remain high and will dampen demand for airline growth. Without airline growht, the number of 787's needed decreases.

13 posted on 06/25/2008 9:22:56 AM PDT by Paleo Conservative (Drill Here. Drill Now. Pay Less.)
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To: Paleo Conservative
Without airline growht [sic], the number of 787's needed decreases.

Which could be a good thing for Boeing, as the number of penalty payments decreases if the airlines voluntarily defer or cancel orders.

Most of the 787 orders, however, are for international airlines, not domestics. You will note that in this story, it is the 737 and A320 orders being cancelled, not 777, 787, A330, and A380 orders.

14 posted on 06/25/2008 11:04:13 AM PDT by Yo-Yo (USAF, TAC, 12th AF, 366 TFW, 366 MG, 366 CRS, Mtn Home AFB, 1978-81)
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To: Yo-Yo
Which could be a good thing for Boeing, as the number of penalty payments decreases if the airlines voluntarily defer or cancel orders.

I'm glad someone made this point. I've made it myself on another forum.

Most of the 787 orders, however, are for international airlines, not domestics. You will note that in this story, it is the 737 and A320 orders being cancelled, not 777, 787, A330, and A380 orders.

Except for American Airlines which wants to replace MD-80's with 737NG's. They should be helped by the number of deferred orders by other airlines for 737's.

15 posted on 06/25/2008 11:59:52 AM PDT by Paleo Conservative (Drill Here. Drill Now. Pay Less.)
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To: trumandogz
Yes, we should drill here but that will not be enough to significantly lower the price of oil.

Mr Obama, what are you doing on FR?

16 posted on 06/25/2008 9:34:47 PM PDT by hattend (Obama is a lying idiot. We're so screwed. - Rush Limbaugh)
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To: hattend

Drilling in the U.S. will only decrease the rate of which the price of oil increases.

WASHINGTON (Reuters) - Allowing oil drilling in U.S. offshore waters that are now closed to energy exploration would do little to lower gasoline prices paid by consumers, the government’s top energy forecaster said on Wednesday.

http://uk.reuters.com/article/oilRpt/idUKN2546114820080625


17 posted on 06/26/2008 1:06:01 AM PDT by trumandogz ("He is erratic. He is hotheaded. He loses his temper and it worries me." Sen Cochran on McCain)
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To: conservatism_IS_compassion
Declare war on Democrats!

You may be on to something....

18 posted on 06/26/2008 1:20:57 AM PDT by meyer (Government is the problem, not the solution.)
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To: trumandogz

Well, if a gov’t hack and Reuters says supply and demand is dead, who am I to disagree?


19 posted on 06/26/2008 5:13:26 AM PDT by hattend (Obama is a lying idiot. We're so screwed. - Rush Limbaugh)
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To: Paleo Conservative

There is a twist to this. Newer planes are much more fuel efficient than older planes. Better powerplants and wing designs.


20 posted on 06/26/2008 5:18:24 AM PDT by Drango (A liberal's compassion is limited only by the size of someone else's wallet.)
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To: trumandogz; jazusamo
Allowing oil drilling in U.S. offshore waters that are now closed to energy exploration would do little to lower gasoline prices paid by consumers
. . . whereas pie-in-the-sky, paper tiger plans to conserve our way out of the problem will do nothing to lower gasoline prices paid by consumers. In fact,

Price is the language in which free people request goods and services.

Any governmental "price control" is censorship, pure and simple.

Money is the credit the we-the-people give to individuals for supplying goods or services. Money is inherently scarce because the ability, and thus the willingness, to give real credit for performance is limited. I can only give you the money that I have or can borrow, and you cannot expect me to do that without making me want to. The government can, it is true, increase the dollar supply - but since that does not increase the supply of desired goods and services and in crease in the dollar supply does not increase the money supply - the credit represented by a single dollar simply becomes diluted. Which is called inflation (a phenomenon which does not even require government printing presses - inflation occurred in Europe when Spain imported large quantities of gold and silver from South America).

High price is not the problem. The problem is that the government has prevented the people (in the "persons" of the oil companies) from responding to the price of oil (i.e., the request from the rest of the people) by drilling for oil where the oil companies think oil may expeditiously be extracted.

High price is a symptom of the restriction of the response to the people's request of supply. The effect of restriction is exactly the same whether that restriction is done by the interference of the government or by the collusion of the oil companies - and if the government imposes a "windfall profits tax" to expropriate the exaggerated credit for supplying gasoline represented by the high price caused by the government's own restriction of supply, the government is exploiting the people in precisely as if it had seized the oil industry and made it a government monopoly. With the advantage, to the government, that it uses the oil companies as scapegoats to take the blame for the exploitation of the people actually perpetrated by the government.


21 posted on 06/26/2008 6:39:50 AM PDT by conservatism_IS_compassion (The conceit of journalistic objectivity is profoundly subversive of democratic principle.)
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To: conservatism_IS_compassion; trumandogz
Very well stated, cIc. Though I can't begin to put in words like you or the great Thomas Sowell does, I always enjoy reading you both.

Here's an excerpt from an excellent piece by Sowell.

They have fought against the building of hydroelectric dams or nuclear power plants to generate electricity without the use of oil. They love to talk about their own pet "alternative energy sources," without the slightest attention to what these would cost in terms of money, jobs, or our national standard of living.

Even when one of their pet "alternative energy sources" -- windmills -- is proposed to be built near them, suddenly it is not right to spoil their view.

Politicians have indulged these spoiled brats for generations.

Now, when the chickens come home to roost, they are screaming about high prices and Big Oil. That is world class chutzpa.

Liberal politicians have played this game for years. With the help of the liberal media, they have so demonized oil producers and so replaced economics with demagoguery that now Republicans are running scared, which seems to be their favorite exercise.

Oily Politicians I

22 posted on 06/26/2008 8:51:48 AM PDT by jazusamo (DefendOurMarines.org | DefendOurTroops.org)
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To: jazusamo

The entire excerpt should have been italicized.


23 posted on 06/26/2008 8:54:58 AM PDT by jazusamo (DefendOurMarines.org | DefendOurTroops.org)
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To: jazusamo
Very well stated, cIc. Though I can't begin to put in words like you or the great Thomas Sowell does, I always enjoy reading you both. -- jazusamo
Me, mentioned in the same sentence and context with Thomas Sowell!

I'm framing that one! I am gonna post it on my homepage!


24 posted on 06/26/2008 10:04:25 AM PDT by conservatism_IS_compassion (The conceit of journalistic objectivity is profoundly subversive of democratic principle.)
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